Coal Oil JohnnyJuly 6, 2016
T here is a convergence of factors that is dramatically shifting how products, especially new products move from idea to the end user. We have watched and anticipated this change for some time and every once in a while, something happens for us to get a little bit more clarity about what is happening. This book provides you with a snap shot of some of the things that are important to this change.
First you need to junderstand the "traditional channel of distribution." This is how products have moved from manufacturer to the end user since the industrial revolution. Generally, a manufacturer produces a product and sells it to a distributor. The role of the distributor has been to stock product in relative close proximity to their retail customers. The distributor also sells the product to the retaler for the manufacturer. Historically this has also provided a layer of financial protection to the manufacturer as the distributor was the one who had to deal with collecting from the many retailers they served. This system worked extremely well when long distance business communication was by mail and transportation was by railcar and truck load.
Times have changed. Distributors have moved from being primarily service driven to being financially driven and the inventory that once was considered an asset is now considered a liability. Turns and Cash Flow have become the driving forces in the distribution world. Consequently the cost of carrying inventory has been shifted back to the manufacturer in the form of longer average days outstanding on receivables, smaller more frequent orders or both.
Distribution has, for the most part, reduced or eliminated the idea of selling the manufacturers products.What once were exclusive arrangements are now more aptly viewed as cherry picking the best sellers from all the recognized vendors in the market. This creates an homogenized marketplace where every retailer is selling basically the same offering as every othe retailer because the distributor has left them very little in the way of options to differentiate. The selling effor if it exists at all, is focused on selling programs and services that the distributor can provide the retailer.
The financial insulation that distributors once provided to retailers has evaporated over the years as the number of Distributors has consolidated to a relative handful. The manufacturers have learned that as the consolication continues, the risk of loww increases dramatically as the number of distributors decreases.
New Entreprenuers and smart manufacturers have and will continue to take steps to directly market their products to the end consumer. Direct Response Marketing is important for all marketers to know and understand and we suggest you start right here.